Are you ready to open the corporate treasury to the opportunities of PSD2?

PSD2 and Open Banking signal a new era for treasurers. Together, new regulatory developments and innovative technology will bring opportunities to gain greater, more joined-up visibility over accounts, adopt innovative services to streamline and improve banking, and access new payment methods. Are you ready to embrace the benefits?

What are PSD2/Open Banking?

PSD2 is the short name for the second Payment Services Directive, a Europe-wide regulation which enables banks to open up clients' account data in a secure, standardised way, via open application programming interfaces (APIs).

Other authorised businesses, such as technology providers, can then use that account data to develop innovative value-add products and services, for instance around cash management and streamlined payments.

Experts say this will transform the way individuals and businesses bank, create a more competitive financial services landscape, and deliver better and more innovative customer experiences.

Open Banking was introduced in the UK by the Competition and Markets Authority to open up banking services to new competitors and to introduce better services for individual and small business customers. Open Banking has defined standards that make possible the secure sharing of account data between different, authorised entities using Application Programming Interfaces (APIs).

What are the benefits of PSD2/Open Banking?

Because the data a bank holds will no longer be walled off from other providers, treasurers and account holders will benefit from quicker, smarter and more transparent banking in lots of ways.

They’ll be able to see all their account positions in real time in a single view and improve their working capital management by moving money instantly between accounts at different banks and in different currencies.

They will also benefit from improved transparency about transaction charges.

Customers will be able to compare bank accounts and services online with the ability to automatically switch to a new account more quickly and efficiently. They’ll also get quicker and smarter lending decisions, both because of the transparency of available account information and because acceptances from one bank can be rapidly passported to another.

What was PSD1?

Adopted in 2007 and implemented in 2009, the original Payment Services Directive (PSD1) was designed to facilitate secure and inexpensive cross-border payments within the area of the European Union. But as digital innovation has accelerated, new services from fintechs started to emerge that were not covered by PSD1. PSD2 aims to regulate these new services, so increasing competition, creating more choice for clients and consumers and driving down the cost of making payments.

Who’s behind Open Banking/PSD2?

The system is run by Open Banking Ltd, a dedicated not-for-profit organisation. Enforcement of the directive is the responsibility of the Competition & Markets Authority.

What’s the difference between PSD2 and Open Banking?

Open Banking was introduced in the UK with a similar intent to PSD2 of opening up banking services to new entrants and providing better services to customers. The Open Banking Implementation Entity (OBIE) is responsible for delivering both Open Banking and PSD2 in the UK. The OBIE has defined the technical API standards for AISPs and PISPs.

Which sectors are likely to be the early adopters of PSD2/Open Banking?

Ecommerce businesses are likely to be among the first to benefit because their customers are likely to demand payment improvements, especially if big players like Amazon or Apple decide to get on board. Along with retailers, we are likely to see early adopters and competitive solutions in the financial services and utilities spaces too.

Are there any security issues around PSD2/Open Banking?

Experts say the system offers the same level of security as current internet banking services. APIs – the technological backbone of the data sharing – have a good security record. Providers will need strong customer authentication, and only providers approved by the Financial Services Authority (FSA) will be authorised to participate.

When does PDS2/Open Banking happen?

It’s already happening. The Open Banking directive came into legal force on January 13, 2018. The first phase of the requirement went live in March 2017, when banks had to make available such data as ATM locations, branches with disabled access, and easy-to-compare data about their business and retail accounts. All the big banks now have their APIs live. But observers say it will take a while for new services to launch at any scale.

Does PDS2 cover Europe only?

While PSD2 is a European regulation, the US, Australia and other territories will be closely monitoring the uptake of API technology, so there’s a strong chance that the technology will be adopted globally, as with instant payments.

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Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.

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